The power of Branding -Starbucks in China

This power got people to spend more than 10 000 yuan on coffee annually and even if the daily income is 200 yuan, one would not think twice spending 30 yuan just on coffee!

This is the power that Starbucks brand commands in China that allows it to open 500 stores in the decade or so that it is operating in China.

And I am not saying this as an observer, the President of Starbucks China and Asia Pacific John Culver highlighted that "The Starbucks brand continues to resonate with the Chinese consumer,"our second home market outside of the United States". in an article on the Starbucks website.

And it is also this power that allows Starbucks to expand into the 2nd and perhaps 3rd tier city with annual gross income that is below US$3000.00.

It becomes even more amazing to know that just a decade ago, folks in China might not even have heard of this brand, most would have never tasted coffee as they are basically tea drinker.

Starbucks highhandedly convert a nation of tea drinker into coffee loving folks that have no qualms about spending one eight or more of their income on coffee.

My $0.02

I have touch on this in the previous few articles on the marketing saviness of Starbucks and this is just so well demonstrated here.

The positioning of Starbucks is so well perceived that people in China has no qualms spending a fortune on it's products, although it is not rational.

Spending more than one eighth of one's entire income on coffee is simply not rational but that is the power of what good marketing is able to achieve.

Starbucks is not a coffee shop, nor a shop selling coffee. It is an experience, an opportunity to be "cool", "sophisticated", an image that comes to my mind when we are talking about the Starbucks experience.

This is a fact because the price of one Starbucks drink in China versus the US is not that different. Why would Starbucks not lower their price when cost is so much lower in China?

The high price becomes a prestige symbol (positioning), a "face" that China folks would want to have. Not many people can afford the real iPhone, iPad, Gucci and so on.

So, while coffee is expensive, it is still a thing that they can afford. Thus, by keeping their price high, Starbucks is using the price tier effectively to get more customers (consumers that want "face").

Nowhere else can you raise your price and get more customers, this is perhaps the only place in the world where you can do it.

Of course, not all brands are able to do it, for coffee -Starbucks is probably one of the rare few. And if you are looking for an example on branding and positioning can get you more business, this is the example.